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Powell orders ethics review after top officials’ multimillion-dollar trades

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Federal Reserve Chairman Jerome Powell directed staff to review the central bank’s ethics rules for appropriate financial activities after disclosures that several senior central bank officials made multiple multimillion-dollar stock trades in 2020, while others held significant investments.

News of Powell’s inquiry broke after Sen. Elizabeth Warren sent 12 letters to the Fed’s regional bank presidents demanding stricter ethics from the nation’s top central bank officials.

The Massachusetts Democrat called on each Fed president to institute a ban on the ownership and trading of individual stocks by senior officials at each regional office.

Last week, financial disclosures filed by the Fed’s 12 regional presidents revealed some had actively traded in 2020, while others held million-dollar financial positions without making changes to their portfolios.

A Fed spokesman told CNBC that Powell last week ordered a “fresh and comprehensive look at the ethics rules around permissible financial holdings and activities by senior Fed officials.”

Powell ordered the review “because the trust of the American people is essential for the Federal Reserve to effectively carry out our important mission,” the spokesman said. “This review will assist in identifying ways to further tighten those rules and standards. The Board will make changes, as appropriate, and any changes will be added to the Reserve Bank Code of Conduct.”

Documents released last week revealed that Dallas Fed President Robert Kaplan made multiple trades worth $1 million or more last year in individual stocks including Apple, Amazon and Delta Air Lines.

Boston Fed President Eric Rosengren held stakes in four real estate investment trusts and several purchases and sales of similar property-owning vehicles, according to filings. He also held stock in Pfizer, Chevron and AT&T. His investments were in the tens to hundreds of thousands of dollars.

Other Fed presidents, such as Richmond Fed President Thomas Barkin, disclosed little to no trading activity but several financial holdings in excess of $1 million.

His stakes included Coca-Cola stock worth more than $500,000 but less than $1 million. Barkin’s largest holdings, worth $1 million or more, included a variety of exchange-traded and mutual funds overseen by outside managers.

He had, for example, a holding worth at least $1 million in Vanguard’s Energy Fund Admiral Shares, a mutual fund that invests in energy companies including ConocoPhillips, Marathon Petroleum and BP.

Even the appearance of self-dealing at the Fed could prove problematic to an institution tasked with the impartial oversight of U.S. employment and inflation.

The trades quickly came under scrutiny given the Fed’s critical role in managing the U.S. economy as well as its influence over interest rates and liquidity markets.

The Covid-19 pandemic and ensuing recession magnified the Fed’s power in 2020. Congress allows the Fed, with the Treasury Department’s approval, to embark on a wide range of emergency lending measures to flush the economy with cash during times of crisis.

Rosengren, Barkin and Kaplan serve as presidents of three of the Fed’s 12 regional banks that span the country. The regional bank presidents take turns serving on the Federal Open Market Committee, the Fed’s policymaking body that sets interest rates across the economy.

Amid the public backlash, both Kaplan and Rosengren have agreed to sell their individual stock holdings.

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Separately, Warren sent letters to all of the Fed’s regional bank presidents demanding tighter restrictions on the type of financial activity officials can engage in.

Each letter, all dated Sept. 15, was similar to the next except for the two addressed to Kaplan and Rosengren.

“As the Fed took extraordinary actions to address the risks to the economy and the banking and financial systems from the COVID-19 pandemic, you and your colleague Eric Rosengren made extensive trades in individual stocks and real estate investment trusts,” Warren wrote in her letter to Kaplan.

That trading, she added, “has prompted concerns about conflicts of interest among high-level officials with far-reaching policymaking influence and extraordinary access to information about the economy.”

The Fed played a leading role in the U.S. economic recovery from the worst of the coronavirus recession.

Economists say that its political independence allowed it to move more quickly than Congress and that its monthly purchase of $120 billion in U.S. debt and mortgage-backed securities helped sustain countless businesses that saw business swoon last year.

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Bitcoin jumps to new record high above $65,000 after landmark U.S. ETF launch

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A visual representation of bitcoin.

STR | NurPhoto via Getty Images

Bitcoin notched a fresh all-time high on Wednesday as investors cheered the successful launch of the first U.S. bitcoin futures exchange-traded fund.

The world’s largest cryptocurrency climbed more than 2% to $65,607.92, topping a previous record of $64,899 set in mid-April.

Bullish comments from a legendary trader also boosted sentiment. Billionaire investor Paul Tudor Jones called crypto his preferred inflation hedge over gold.

“Bitcoin would be a great hedge. Crypto would be a great hedge,” Jones told CNBC’s “Squawk Box” on Wednesday. “There’s a plan in place for crypto and clearly it’s winning the race against gold at the moment … I would think that would also be in very good inflation hedge. It would be my preferred one over gold at the moment.”

The ProShares Bitcoin Strategy ETF, which tracks bitcoin futures contracts speculating on the future price of the cryptocurrency, rose nearly 5% on its first day of trading Tuesday.

Not everyone in the crypto market was impressed. Several bitcoin investors want an ETF that tracks spot prices rather than futures.

Novice investors have had to get to grips with terms like “contango,” where the futures price of a commodity is higher than its spot price, and “backwardation,” which is essentially the opposite.

“More products are great, but I just don’t see the point of investing in futures-based bitcoin ETFs when you can buy the asset in the spot market,” said Jodie Gunzberg, managing director of CoinDesk Indexes.

“It’s not like oil or cattle that is impossible to hold physically for most investors. It’s more like gold that can be easily held. Except the cost is more like oil.”

Still, it’s a landmark for the nascent crypto industry, which has long been pushing for greater acceptance of bitcoin and other digital currencies on Wall Street.

—CNBC’s Hannah Miao contributed reporting.

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Facebook fined by CMA for ‘deliberate’ breach during Giphy probe

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The logos of Facebook and Giphy.

Aytac Unal | Anadolu Agency via Getty Images

LONDON — Facebook has been fined £50.5 million ($69 million) for breaching an order imposed by the U.K. competition regulator, which is probing its takeover of gif-sharing platform Giphy.

The Competition and Markets Authority, which handed out the penalty Wednesday, issued Facebook with what’s known as an initial enforcement order in June 2020 as it began its investigation into the firm’s acquisition of Giphy.

The order is designed to ensure companies continue to compete as they would in the absence of a merger and it prevents them from integrating further.

Facebook is legally required to provide the CMA with regular updates to show that it is complying with the order but the CMA said Facebook “significantly limited the scope of those updates” despite repeated warnings.

The regulator added that this is the first time a company has been found to have breached an IEO by “consciously refusing” to report all the required information. It added that Facebook’s failure to comply was “deliberate,” noting that the company was given multiple warnings.

Facebook did not immediately respond to a CNBC request for comment.

“Initial enforcement orders are a key part of the U.K.’s voluntary merger control regime,” said Joel Bamford, senior director of mergers at the CMA.

“Companies are not required to seek CMA approval before they complete an acquisition but, if they decide to go ahead with a merger, we can stop the companies from integrating further if we think consumers might be affected and an investigation is needed.”

He added: “We warned Facebook that its refusal to provide us with important information was a breach of the order but, even after losing its appeal in two separate courts, Facebook continued to disregard its legal obligations. This should serve as a warning to any company that thinks it is above the law.”

In August, the CMA said it had provisionally found Facebook’s purchase of Giphy would harm competition between social media platforms and remove a potential challenger in the display advertising market.

The CMA said it may require Facebook to unwind the deal, which is reportedly worth $400 million, and sell off Giphy if its competition concerns are ultimately confirmed.

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Fossil fuel use dangerously out of sync with global targets

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A bulldozer parked near a coal mound on the grounds of the Peabody Energy Francisco coal mine in Francisco, Indiana, U.S., on Thursday, Sept. 23, 2021.

Luke Sharrett | Bloomberg | Getty Images

LONDON — As world leaders prepare for one of the most important climate summits ever held, U.N.-backed research shows governments are collectively planning to extract far more fossil fuels than would be consistent with global climate targets.

The United Nations Environment Programme’s annual production gap report, published on Wednesday, found governments were on track to produce more than twice the levels of fossil fuels in 2030 than would be needed to keep rising global temperatures to below 1.5 degrees Celsius above pre-industrial levels.

Ahead of the COP26 climate summit in just over a week, politicians and business leaders are under immense pressure to meet the demands of the climate emergency by delivering on promises made as part of the landmark 2015 Paris Agreement.

The Paris climate accord aims to limit global heating to “well below” 2 degrees Celsius, and preferably to limit warming to the threshold of 1.5 degrees Celsius.

While every fraction of a degree matters, the aspirational goal of 1.5 degrees Celsius is regarded as particularly important because beyond this level, so-called tipping points become more likely.

The UNEP’s report finds most major oil and gas producers are planning on increasing production out to 2030 and beyond, while several major coal producers are also planning on continuing or increasing production.

By the end of the decade, government’s production plans and projections were forecast to lead to around 240% more coal, 57% more oil and 71% more gas than would be consistent with limiting global heating to 1.5 degrees Celsius.

The findings reaffirm the yawning gap between meaningful climate action and the rhetoric of policymakers and business leaders publicly touting their commitment to the so-called “energy transition.”

Policy support for fossil fuels

Burning fossil fuels, such as coal, oil and gas, is the chief driver of the climate crisis. Yet, despite a flurry of net-zero emission goals and increased pledges of many countries, some of the largest oil, gas and coal producers have failed to outline how they plan to drastically scale down fossil fuel use.

The world’s leading climate scientists warned in early August that limiting global heating to close to 1.5 degrees Celsius or even 2 degrees Celsius would be beyond reach in the next two decades without immediate, rapid and large-scale reductions in greenhouse gas emissions.

The UNEP underscored this point once again, noting global fossil fuel production remains “dangerously out of sync” with Paris Agreement limits. It said worldwide fossil fuel use must start declining immediately and steeply to be consistent with limiting long-term warming to 1.5 degrees Celsius.

The report analyzed 15 major fossil fuel producers: Australia, Brazil, Canada, China, Germany, India, Indonesia, Mexico, Norway, Russia, Saudi Arabia, South Africa, the United Arab Emirates, the U.K. and the U.S.

The climate plans of the countries analyzed show oil, gas and coal production was on track to increase until at least 2040.

Of the three fossil fuels, gas production was expected to increase the most between 2020 and 2040, the report said, based on the governments’ plans.

Oil rigs work on platforms in Gaoyu Lake in Gaoyou in east China’s Jiangsu province Friday, Sept. 17, 2021.

Barcroft Media | Getty Images

Most governments continue to provide significant policy support for fossil fuel production, the report said, with G-20 countries having directed around $300 billion in new funds to fossil fuel activities since the beginning of the coronavirus pandemic. To be sure, this is more than they have directed toward renewable energy.

Research published in the scientific journal Nature on Sept. 9 found that the vast majority of the world’s known fossil fuel reserves must be kept in the ground to have some hope of preventing the worst effects of climate change.

It follows a bombshell report from the influential, yet typically conservative, International Energy Agency earlier this year. The IEA concluded that there should be no new oil, gas or coal development if the world was to reach net zero fossil fuel emissions by 2050.

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